Business confidence dwindles, as BSA swings in the wind

Unsure about Afghanistan’s security situation, businessmen and investors have begun withdrawing or stalling their capital and assets.

Business confidence tumbled after President Hamid Karzai refused to sign the Bilateral Security Agreement (BSA)–an essential security pact that determines the magnitude of US forces’ presence in Afghanistan.

The 2014 deadline, when foreign forces are scheduled to withdraw from Afghanistan, has had a profound adverse impact on investment in Afghanistan, as investors became reluctant to risk their capital or assets due to security uncertainty.

Endorsing the BSA would guarantee a close military partnership between the U.S. and Afghanistan in the years following the NATO troops withdrawal in 2014. While the 2,500-member Loya Jirga expressed their approval of the agreement, President Karzai issued an ultimatum in the last minute of the Jirga demanding the US to fulfill his  3 preconditions: 1) Cease raids on Afghan homes 2) Breakthrough in talks with the Taliban and 3) Transparent elections in April.

Not sure what political motives exist behind this move from President Karzai; it is, however, certain that the longer the BSA is delayed, the more the economy suffers.

Business insiders have reported that large scale investments and business deals have withdrawn or stalled in recent days.

Real estate industry has considerably shrunk and property prices are plunging. The Afghani currency is losing value against the US dollar. Unemployment is on the rise, and young people are seeking for job opportunities outside of Afghanistan.

The refusal to sign the BSA is  yet another example of how Afghanistan’s economy becomes a victim of politics.